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UK energy intensive industries to be exempted from green energy taxes

04 December 2015

Pressure on Britain’s energy intensive industries (EIIs), such steel and chemicals, will be eased following the Government’s announcement that they would be exempt from environmental taxes. Chancellor George Osborne said in his Autumn statement: "We're going to permanently exempt our Energy Intensive Industries like steel and chemicals from the cost of environmental tariffs, so we keep their bills down, keep them competitive and keep them here.&quot

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This will mean the EIIs will avoid green taxes such as the renewables obligation and feed-in tariffs, which are intended to promote the use of green energy.

More than 5,000 jobs have gone in Britain’s struggling steel industry this year with companies citing the high cost of energy as a major factor behind the job losses, along with dumping by Chinese steel manufacturers. Steelmakers have been campaigning for action on both fronts, but say measures to cut their energy bills – some of the highest in Europe - could be imposed quickly and offer instant relief.

Earlier this year, it was announced that SSI's steel plant in Redcar was closing, and that Tata Steel is to cut jobs at its plants in Scunthorpe and Lanarkshire.

Gareth Stace, director of UK Steel, said the change was "was enormously welcome and demonstrates that the government is dedicated to finding a long term solution to this problem".

The government had already put in place a compensation scheme to answer the concerns of high energy users.

Stace said: "With a move to an exemption rather than compensation, government has ended this uncertainty and we can now look forward to a more level playing field in terms of energy prices for our steel plants."

He also said the exemption announced by the Chancellor in the Autumn Statement would not come into effect until next year and ultimately, pressure would remain on the steel industry until EU approval is given for state aid.

Karl Koehler, chief executive of Tata's European operations, gave the plan a lukewarn welcome, calling the benefits "marginal in the current business environment".

"It is welcome as an exemption gives greater certainty that these costly levies will not reappear," he added. "However, compensation for the renewables obligation was first announced in 2012 to help level the competitive playing field for UK foundation industries.

"Since then, UK steel producers have experienced a perfect storm of spiralling regulatory costs and rising levels of unfairly traded imports. Yet even today there is no clarity on when these additional costs will stop being levied."